Could We Afford a Freehold Property?

As mentioned in last week's blog post, Areas Where We Saved for Our House Purchase, we were looking for a condominium somewhere in between where our parents stay. The area that we looked at has only 99-year leasehold condos. Since leasehold properties have to be returned to the government after the lease expires, we wondered, out of curiosity, whether we could afford a 999-year leasehold or freehold condo which could retain value much better than a 99-year leasehold condo.

In recent years, there are very few new 999-year leasehold or freehold condos. We went to an area where there are a few older condos, aged around 10 years old, which is the age of the condo that we bought. Our condo is a 99-year leasehold starting from 2002 and completed in 2007. There, we found a condo which is a 956-year leasehold starting from 1928 (leaving it with 867 years more on the leasehold) and another condo which is a freehold. For all purpose and intent, the 956-year leasehold is almost like a 999-year leasehold. Continuing the convention used in last week's blog post, we will call the above-mentioned 3 condos as Condo A (99-year leasehold), Condo E (999-year leasehold) and Condo F (freehold). The average transaction price (not price per square foot) of the condo units between Jan 2017 and Jan 2018, by no. of rooms and floor area respectively, are shown below.

Rooms	Condo A	Condo E	Condo F
	99-year	999-year	Freehold
2	$953	$1,111	$1,007
2+Study	$979	-	-
3	$1,182	$1,438	$1,255
4	-	$1,830	$1,680
Penthouse	-	$2,450	$2,320

Area	Condo A	Condo E	Condo F
	99-year	999-year	Freehold
801-900	$953	-	-
901-1000	$979	$1,111	$1,007
1001-1100	-	-	-
1101-1200	$1,182	-	-
1201-1300	-	$1,438	$1,255
1301-1400	-	-	-
1401-1500	-	-	-
1501-1600	-	$1,830	-
1601-1700	-	-	$1,680

Do note the limitations for the data above, which are described in last week's blog post. On average, Condo A has 3.1 transactions per month, Condo E has 2.8 transactions while Condo F has 0.8 transactions.

Looking at the data above, the 999-year leasehold condo is more expensive than the freehold condo, likely due to the small no. of transactions for the freehold condo. I will assume that the prices for Condo F are anomalies and consider only the 999-year leasehold condo.

Comparing between Condo A and Condo E, the price difference is $158K for a 2-room unit and $256K for a 3-room unit. A 2-room unit in Condo E costs slightly less than a 3-room unit in Condo A and is still within our loan eligibility. However, the area where Condos E and F are located is far away from any amenities. It has no MRT station, shopping centre, market, hawker centre, not even a retail mom-and-pop stall. Even the bus stop along the main road is some distance away. To buy groceries, we would need to take a bus to the nearest town centre and cart them back. It would be difficult to commute to and fro daily. A car is necessary, which would add at least another $200K in future expenses. After considering these additional expenses, the 999-year leasehold or freehold condo is out of our reach.

In the final analysis, even though a 999-year leasehold or freehold condo would provide much better investment value, it is really inconvenient for us. A house should be a place where we seek comfort after a hard day of work, not a place where we have to labour to and fro everyday. For these reasons, we did not consider the 999-year leasehold or freehold condo.

See related blog posts:

• Areas Where We Saved for Our House Purchase
• How Much is Proximity to a MRT Station Worth?
• Do Properties or Shares Make Better Investments?